Business activity in Egypt rises for the first time in three years

The S&P Global Egypt PMI signalled a fresh expansion in the non-oil private sector economy in August, as businesses raised their output levels for the first time in exactly three years.

The uplift came amid further reports of a demand recovery, despite new work easing slightly for the second month running.

Companies also expanded their inventories and hired additional staff, as optimism towards future business activity improved to the strongest since mid-2022.

At the same time, there was a sharp pick-up in inflationary pressures at non-oil businesses, as firms faced greater costs due to a weakening in the pound against the US dollar.

Purchase prices rose markedly, leading to a steep uplift in selling charges as firms sought to protect their margins.

The headline seasonally adjusted S&P Global Egypt Purchasing Managers’ Index (PMI) is a composite gauge designed to give a single-figure snapshot of operating conditions in the non-oil private sector economy. It is calculated from measures of new orders, output, employment, supplier delivery times and stocks of purchases.

Notably, the headline PMI climbed above the neutral threshold of 50.0 in August, rising from 49.7 in July to 50.4, to signal the first improvement in the health of the non-oil private sector since November 2020.

Four out of the five sub-components positively influenced the headline index in August, including renewed rises in output and stocks of purchases. New orders was the only negative factor, although firms reported only a marginal drop overall. Indeed, the past three months of survey data has been broadly indicative of a stabilisation in demand conditions, with many firms commenting on a market recovery amid improved macro-economic factors and rising export business. This stability led firms to increase their activity for the first time in three years in August, although the pace of expansion was only marginal.

David Owen, Senior Economist at S&P Global Market Intelligence, said: “Business conditions are on the mend according to the August survey data, as the PMI’s jump into above-50 territory indicated an improvement at non-oil businesses for the first time since late 2020.

“Notably, several of the PMI sub-indices signalled growth in August, with increases in output, employment and purchasing activity showing that firms were confident enough to expand their activity and capacity. Business expectations were also up, adding to signs that firms are hopeful that economic conditions are set to be more stable.

“Nevertheless, the situation appears mixed, with many companies still reporting weak client demand, leading to another slight drop in total new orders. Rising price pressures are another risk - August data signalled the fastest uplifts in costs and charges for five months - which has the potential to limit spending and weaken the market recovery.”